The Unique Identification Authority of India (UIDAI) has revoked access for a dozen agencies currently providing eKYC verification and authentication services throughout India’s ever-expanding digital market.

Created with one goal in mind, the UIDAI is responsible for issuing unique identification numbers (referred to as Aadhaar) to the residents of India. This enables cost-effective security measures that mitigate against duplicate and fake identities and offers easy and secure identification verification.

So what could be the reason to revoke access? An article in CIO explains how this most recent development came soon after the Supreme Court revealed some “critical observations around multiple unregulated entities accessing the [UIDAI] database.”

And this is not the first time privileges have been revoked. As part of an earlier security audit in September of last year, UIDAI blacklisted 49,000 enrollment centers, according to The Times of India.

Without access to the network, the affected agencies are unable to provide eKYC verification to assist in the onboarding of new customers or the authenticating of financial transactions. Businesses currently depending on them to successfully route their eKYC verification services must now incur much higher costs to physically verify the credentials of their customers. This specifically impacts ecommerce players and peer-to-peer lending platforms operating exclusively online, according to the Times article.

“This is detrimental to fintech companies which rely on eKYC for user verification and onboarding,” Managing Director and Founder of PayU India Jitendra Gupta told the Times.

Gupta explained that a physical KYC costs approximately Rs 100 per person ($1.54 USD) compared to Rs 15 ($0.23 USD) when done via eKYC. PayU’s pay later service LazyPay onboards an average of 40,000 to 50,000 users every day, according to the same article. Being forced to conduct physical KYC for them would be a very costly initiative.

Another interesting point comes from Airpay co-founder and CEO Amit Kapoor. Kapoor tells PaymentFacilitator that the UIDAI’s enablement of eKYC demonstrates the Indian regulator’s support of going cashless. Help from UIDAI makes the process of onboarding customers more cost-efficient and scalable, especially given the unique challenges of India’s geography.

He also believes the inconvenience of resorting to other KYC measures is only a temporary setback for a system that is still in development: “We do believe it’s temporary and we are confident that it will soon be back in action. Fortunately, most of us were still adopting the same and running both [physical and electronic] parallel processes.”

Airpay is a payment facilitator local to the Indian marketplace.